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£1,000 in fares but only £800 paid out? The HMRC Making Tax Digital issue taxi and PHV app drivers need to understand
Cabbies working through apps such as Uber, Bolt and Freenow are likely facing an important record-keeping question under Making Tax Digital: is the money arriving in their bank account enough to accurately record their business income?
For some drivers, relying solely on bank deposits could risk confusing gross passenger fares with net payouts made after an operator or platform has deducted commissions and other charges.
Under Making Tax Digital for Income Tax, qualifying self-employed drivers must maintain digital records and submit quarterly information to HM Revenue and Customs using compatible software.
The distinction between gross income and net payouts is therefore important.
Take a simplified example. If passenger fares attributable to a driver total £1,000 but an app deducts £200 in commission before transferring £800, simply recording the £800 bank deposit as business turnover could fail to reflect the full picture. Depending on the contractual and accounting treatment, the records a records are likely to need to show £1,000 of income alongside the relevant £200 cost.
Drivers should therefore understand what their operator statements actually show rather than assuming every payment reaching their bank account represents the correct figure to record as turnover.
This becomes more complicated for drivers working across multiple platforms with different commissions and fees.
A private hire driver could potentially accept bookings from Uber and Bolt, while a taxi driver might combine Freenow by Lyft bookings with traditional rank and street-hail work. Drivers could also receive direct card and cash payments.
No single operator statement would necessarily capture the driver’s complete business activity.
Platform statements can nevertheless be valuable records. They can provide details of fares, commissions, fees and payments that would be difficult to reconstruct accurately from bank transactions alone.
The important issue is understanding whether figures shown as earnings, fares, fees and payouts represent gross or net amounts and ensuring they are recorded consistently within the driver’s accounting system.
Bank statements alone can create other problems.
Cash income may never appear as a bank deposit if it is subsequently spent rather than paid into an account. Equally, a bank transaction may combine several elements of app activity into a single payout, giving little indication of the underlying fares and deductions.
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Making Tax Digital does not mean drivers must send HMRC every individual journey or app receipt each quarter. As TaxNav recently explained to TaxiPoint, quarterly submissions contain income and expense information, while the underlying digital records support those totals.
The record-keeping requirement therefore puts greater importance on accurately bringing together information from different sources.
Drivers should also avoid assuming that an operator or platform will effectively complete their MTD obligations for them. Operators may supply detailed statements and transaction histories, but the responsibility for maintaining the driver’s own tax records remains with the self-employed taxpayer.
